“Best results out of any of the Canadian banks. Blew the doors off even with a significant currency impact,” said Barry Schwartz, vice-president and portfolio manager at Baskin Financial Services.

Royal Bank of Canada (RY.TO), the country’s biggest lender, fell 1.7 percent to C$54.20, extending its decline after posting earnings last week that fell short of high market expectations.

“After the selloff in May, banks are now trading at quite a reasonable valuation. I don’t know what people are worried about,” Schwartz said.

In an anticipated move, the Bank of Canada raised its key interest rate to 0.5 percent from 0.25 percent on Tuesday, making Canada the first Group of Seven country to raise rates since the start of the recession. But the bank said the European debt crisis made its next rate move highly unpredictable. [ID:nN01103957]

“Obviously the Bank of Canada’s rate announcement was expected but the fact that the bank took a somewhat cautious stance on further rate hikes may have been a little bit of a surprise to the markets,” said Picardo.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended 191.02 points, or 1.62 percent, lower at 11,571.97. The index swung between positive and negative for much of the day.

“It’s a familiar pattern, something that we’ve seen in previous days as well, where you have a bout of nervousness in the last hour of trading and the market seem to give up the gains of the day,” said Picardo.

“In the case of the TSX it’s also possible that we had a 90-point gain yesterday, so today’s pullback, we’re merely giving part of that back.”